- Strong Execution of April 2020 Revised Operating Plans
- Underground Ramp-Up at Grasberg Advancing on Schedule
- Second-quarter 2020 Consolidated Copper and Gold Sales Above
Target
- Solid Cost and Capital Management
Freeport-McMoRan Inc. (NYSE: FCX) today provided an update on
its second quarter operational and financial performance and
ongoing response to the COVID-19 pandemic.
In April 2020, FCX (“the Company”) announced revised operating
plans in response to the global COVID-19 pandemic and resulting
negative impact on the global economy. The Company is executing the
revised operating plans in an effective manner while prioritizing
the health and well-being of its employees, their families and
communities.
Prioritizing Health and Safety. FCX has proactively
implemented operating protocols at each of its operating sites to
contain and mitigate the risk of spread of COVID-19. The Company
also continues to work closely with communities where it operates
across the globe and has provided monetary support and in-kind
contributions of medical supplies, equipment and food.
Execution of April 2020 Revised Operating Plans. FCX’s
2020 revised operating plans are focused on safeguarding its
business in an uncertain public health and economic environment,
advancing the ramp-up of underground production at Grasberg to
establish large-scale, low-cost copper and gold production, and
advancing initiatives in the Americas to position FCX for
significant increases in cash flows in 2021 and beyond.
During the second quarter, FCX met or exceeded several key
performance targets included in its April 2020 revised operating
plans. Second-quarter 2020 copper sales are expected to exceed the
April 2020 estimate of 690 million pounds by approximately 8
percent and gold sales are expected to exceed the April 2020
estimate of 165 thousand ounces by approximately 10 percent.
North America. The revised operating plans were
effectively implemented across FCX’s North America operating sites
and production, costs and capital management were in line or better
than forecast. The Lone Star project is substantially complete and
on track to produce approximately 200 million pounds of copper per
annum beginning in the second half of 2020.
South America. Significant progress was achieved at Cerro
Verde during the second quarter to restore operations following
COVID-19 restrictions imposed by the Peruvian government in March
2020. Strict health protocols have been implemented and a plan for
Cerro Verde was approved by the Peruvian government in second
quarter 2020. During June, Cerro Verde mill operations averaged
315,000 metric tons of ore per day, approximately 80 percent of the
2019 annual average. Cerro Verde’s operating rates are in line with
the April 2020 operating plan. FCX is continuing to operate El Abra
consistent with its April 2020 operating plan while closely
monitoring public health conditions in Chile.
Indonesia. The ramp-up of underground production at the
Grasberg minerals district in Indonesia continues as-planned.
During the second quarter, combined production rates from the
Grasberg Block Cave and Deep MLZ (DMLZ) underground mines exceeded
54,000 metric tons of ore per day, approximately 9 percent above
the April 2020 estimate and 46 percent above the first-quarter 2020
average. At the end of June 2020, combined production from the
Grasberg Block Cave and DMLZ averaged approximately 70,000 metric
tons of ore per day. PT Freeport Indonesia expects its 2021 copper
and gold production to approximate 1.4 billion pounds of copper and
1.4 million ounces of gold, nearly double projected 2020
levels.
Financial Items
Assuming an average estimated second-quarter 2020 copper price
realization of $2.54(1) per pound and preliminary sales estimates,
FCX expects second-quarter 2020 adjusted earnings before interest,
taxes, depreciation and amortization (Adjusted EBITDA) to
approximate $650 million and expects to record a small net loss
before nonrecurring items (adjusted net income) approximating $0.03
per share. These amounts exclude COVID-19 costs and nonrecurring
costs associated with employee separation programs implemented in
response to market conditions.
(1) The LME copper settlement price
averaged $2.43 per pound during second-quarter 2020. The average
three-month forward price at the end of June was $2.73 per pound
and will be used to record provisionally priced copper sales,
expected to finally settle in the second half of 2020.
At March 31, 2020, FCX had provisionally
priced copper sales at its copper mining operations totaling 187
million pounds of copper (net of intercompany sales and
noncontrolling interests) recorded at an average of $2.24 per
pound, subject to final pricing over the next several months. FCX
estimates that the mark-to-market impact of higher copper prices in
the quarter associated with March 31, 2020, provisionally priced
sales will increase second-quarter 2020 revenues by approximately
$60 million.
At June 30, 2020, FCX had no amounts drawn under its $3.5
billion revolving credit facility. At June 30, 2020, total
consolidated debt is estimated to approximate $9.9 billion and
consolidated cash is estimated to approximate $1.5 billion.
The 2020 financial estimates in this press release are based on
modeled results and subject to further changes upon completion of
FCX’s normal closing process and finalization of quarterly
financial and accounting procedures.
On Thursday, July 23, 2020, FCX plans to release second-quarter
2020 financial and operating results before the market opens and
will host a conference call with securities analysts at 10:00 a.m.
Eastern Time to discuss the results. An audio webcast of the
conference call along with slides will be broadcast live on
fcx.com. FCX will post its second-quarter 2020 press release with
quarterly results on its website prior to the conference call. To
receive FCX press releases via email when they are posted on
“fcx.com”, interested parties can sign up for email alerts at
https://investors.fcx.com/investors/investor-resources/set-email-alerts.
FCX is a leading international mining company with headquarters
in Phoenix, Arizona. FCX operates large, long-lived, geographically
diverse assets with significant proven and probable reserves of
copper, gold and molybdenum. FCX is one of the world's largest
publicly traded copper producers.
FCX’s portfolio of assets includes the Grasberg minerals
district in Indonesia, one of the world's largest copper and gold
deposits; and significant mining operations in North America and
South America, including the large-scale Morenci minerals district
in Arizona and the Cerro Verde operation in Peru. Additional
information about FCX is available on FCX's website at
"fcx.com."
Cautionary Statement and Regulation G Disclosure: This
press release contains forward-looking statements in which FCX
discusses its potential future performance. Forward-looking
statements are all statements other than statements of historical
facts, such as plans, projections, or expectations relating to ore
grades and milling rates; forecasts or expectations regarding
business outlook; production and sales volumes; unit net cash
costs; cash flows; capital expenditures; liquidity; operating
costs; operating plans; cost savings; FCX's expectations regarding
its share of PT-FI's net (loss) income and future cash flows
through 2022; PT-FI's development, financing, construction and
completion of a new smelter in Indonesia; improvements in operating
procedures and technology; exploration efforts and results;
development and production activities, rates and costs; tax rates;
export quotas and duties; the impact of copper, gold and molybdenum
price changes; the impact of deferred intercompany profits on
earnings; reserve estimates; execution of the settlement agreement
associated with the Louisiana coastal erosion cases; and future
dividend payments, share purchases and sales. The words
“anticipates,” “may,” “can,” “plans,” “believes,” “estimates,”
“expects,” “projects,” "targets," “intends,” “likely,” “will,”
“should,” “could,” “to be,” ”potential," “assumptions,” “guidance,”
“future” and any similar expressions are intended to identify those
assertions as forward-looking statements. The declaration of
dividends is at the discretion of the Board and will depend on
FCX's financial results, cash requirements, future prospects, and
other factors deemed relevant by the Board.
FCX cautions readers that forward-looking statements are not
guarantees of future performance and actual results may differ
materially from those anticipated, expected, projected or assumed
in the forward-looking statements. Important factors that can cause
FCX's actual results to differ materially from those anticipated in
the forward-looking statements include, but are not limited to, the
duration and scope of and uncertainties associated with the
COVID-19 pandemic, and the impact thereof on commodity prices,
FCX’s business and the global economy, which are evolving and
beyond FCX’s control, and any related actions taken by governments
and businesses (including the Peruvian government’s order); FCX’s
ability to contain and mitigate the risk of spread or major
outbreak of COVID-19 at its operating sites, including at PT-FI’s
remote operating site in Papua; supply of and demand for, and
prices of, copper, gold and molybdenum; mine sequencing; changes in
mine plans or operational modifications, delays, deferrals or
cancellations; production rates; timing of shipments; results of
feasibility studies; potential inventory adjustments; potential
impairment of long-lived mining assets; the potential effects of
violence in Indonesia generally and in the province of Papua; the
Indonesian government's extension of PT-FI's export license after
March 15, 2021; risks associated with underground mining;
satisfaction of requirements in accordance with PT-FI's special
mining license (IUPK) to extend mining rights from 2031 through
2041; the Indonesian government's approval of a deferred schedule
for completion of the new smelter in Indonesia; expected results
from improvements in operating procedures and technology, including
innovation initiatives; industry risks; regulatory changes;
political and social risks; labor relations; weather- and
climate-related risks; environmental risks; litigation results;
cybersecurity incidents; changes in general market, economic and
industry conditions; financial condition of FCX’s customers,
suppliers, vendors, partners and affiliates, particularly during
weak economic conditions and extended periods of low commodity
prices; reductions in liquidity and access to capital; and other
factors described in more detail under the heading “Risk Factors”
in FCX's Annual Report on Form 10-K for the year ended December 31,
2019, and Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2020, each filed with the U.S. Securities and
Exchange Commission (SEC), as updated by FCX's subsequent filings
with the SEC. The second-quarter 2020 financial estimates in this
press release are based on modeled results and subject to further
changes upon completion of FCX’s normal closing process and
finalization of quarterly financial and accounting procedures.
Investors are cautioned that many of the assumptions upon which
FCX's forward-looking statements are based are likely to change
after the forward-looking statements are made, including for
example commodity prices, which FCX cannot control, and production
volumes and costs, some aspects of which FCX may not be able to
control. Further, FCX may make changes to its business plans that
could affect its results. FCX cautions investors that it does not
intend to update forward-looking statements more frequently than
quarterly notwithstanding any changes in its assumptions, changes
in business plans, actual experience or other changes, and FCX
undertakes no obligation to update any forward-looking
statements.
Adjusted EBITDA and net income before non-recurring items are
non-GAAP financial measures that are frequently used by securities
analysts, investors, lenders and others to evaluate companies’
performance, including, among other things, profitability before
the effect of financing and similar decisions. Adjusted EBITDA and
net income before non-recurring items should not be considered as a
substitute for measures of financial performance prepared in
accordance with GAAP. Adjusted EBITDA and net income before
non-recurring items may not necessarily be comparable to similarly
titled measures reported by other companies, as different companies
calculate such measures differently. A reconciliation of the
forward-looking non-GAAP financial measures in this press release
to the most directly comparable financial measures calculated and
presented in accordance with GAAP are not available at this time.
However, a detailed reconciliation of non-GAAP financial measures
to the most directly comparable GAAP financial measures will be
presented in connection with FCX’s release reporting full financial
results for the quarter ended June 30, 2020 scheduled to be
released on July 23, 2020.
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version on businesswire.com: https://www.businesswire.com/news/home/20200706005257/en/
Financial Contacts: Kathleen L. Quirk (602) 366-8016 David P.
Joint (504) 582-4203 Media Contact: Linda S. Hayes (602)
366-7824
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